Benchmark JGBs inch down, solid 10-year sale supports

TOKYO, June 3 (IFR) - Benchmark Japanese government bonds inched lower on Tuesday, while the 30-year zone edged up and a solid 10-year sale supported market sentiment.

Earlier, a few domestic long-term investors bought 30-year JGBs to average down their costs ahead of the massive quarterly JGB redemption on June 20.

The Ministry of Finance sold 2.1904 trillion yen ($21.44 billion) of 10-year JGBs with a lowest accepted price of 99.91, and a coupon of 0.60 percent, the same as the current issue.

The bid-to-cover ratio, which gauges market demand, rose to 3.74, from 3.54 at last month’s 10-year sale.

The yield on the current 10-year JGBs rose 0.5 basis point from Monday to 0.585 percent, compared with a high of 0.590 percent earlier in the session.

In the superlong zone, the 20-year yield was flat at 1.445 percent, after rising to 1.450 percent earlier. The 30-year yield inched down 0.5 basis point to 1.690 percent, though gains were limited by caution ahead of Thursday’s monthly 400 billion yen 30-year JGB auction.

The 5-year JGB was yet to be actively traded among brokers.

A drop in U.S. Treasuries prices overnight weighed on JGB prices. The yield on the 10-year U.S. Treasuries posted the largest daily advance in more than six weeks on Monday, jumping back to 2.53 percent compared with an 11-month low of 2.40 percent hit on Thursday.

The Nikkei financial daily reported that Japan’s $1.26 trillion Government Pension Investment Fund could raise its investment in domestic stocks to 20 percent of its portfolio from the current 12 percent.

Such a move could be negative for JGBs in the future though it had a muted market impact on Tuesday.

Ten-year lead June JGB futures moved in a very narrow 145.31 to 145.36 range before finishing the morning session down 0.04 point at 145.36. Futures were last down 0.01 point at 145.39. ($1 = 102.1750 Japanese Yen) (Reporting by Masatsugu Hisatsune; Editing by Jacqueline Wong)